A Japanese company (Toyota) and an American company (Ford Motors) decided to have a canoe race on the Missouri River Both teams practiced long and hard to reach their peak performance before the race.

On the big day, the Japanese won by a mile.

The Americans, very discouraged and depressed, decided to investigate the reason for the crushing defeat. A management team made up of senior management was formed to investigate and recommend appropriate action.

Their conclusion was the Japanese had 8 people rowing and 1 person steering, while the American team had 7 people steering and 2 people rowing.

Feeling a deeper study was in order; American management hired a consulting company and paid them a large amount of money for a second opinion.

They advised, of course, that too many people were steering the boat, while not enough people were rowing.

Not sure of how to utilize that information, but wanting to prevent another loss to the Japanese, the rowing team's management structure was totally reorganized to 4 steering supervisors, 2 area steering superintendents and 1 assistant superintendent steering manager.

They also implemented a new performance system that would give the 2 people rowing the boat greater incentive to work harder. It was called the 'Rowing Team Quality First Program,' with meetings, dinners and free pens for the rowers. There was discussion of getting new paddles, canoes and other equipment, extra vacation days for practices and bonuses. The pension program was trimmed to 'equal the competition' and some of the resultant savings were channeled into morale boosting programs and teamwork posters.

The next year the Japanese won by two miles.

Humiliated, the American management laid-off one rower, halted development of a new canoe, sold all the paddles, and canceled all capital investments for new equipment. The money saved was distributed to the Senior Executives as bonuses.

The next year, try as he might, the lone designated rower was unable to even finish the race (having no paddles,) so he was laid off for unacceptable performance, all canoe equipment was sold and the next year's racing team was out-sourced to India .

It's taken two rounds of Congressional hearings, some major pride swallowing and three detailed business plans, but it looks as if the Detroit 3 will be getting the federal loans they need, though not as much they asked for. A deal was reportedly reached between Democratic leaders and the White House that will supply around $15 billion in federal loans to the struggling U.S. auto industry. While General Motors, Ford and Chrysler asked for a combined maximum of $34 billion, the $15 billion is designed to ensure they stay alive until March when the issue will be readdressed with the input of a fresh Obama administration. GM and Chrysler reportedly need around $11 billion to survive the new year, while Ford has said it would only need government aid if one of the other two went under.

We're hearing that a deal was reached between Democrats and the Bush administration late Friday after top Dem. Nancy Pelosi gave in to the White House and its position that the money should come from $25 billion in loans previously approved to help the automakers retool for energy fuel efficient vehicles, rather than drawing the aid from the $700 billion Troubled Asset Relief Fund for struggling financial institutions. In return, Pelosi is seeking a guarantee that the money would be replenished in "a matter of weeks."

Both the Senate and House of Representatives have confirmed they will be meeting on Tuesday to vote on the deal, and it's expected that strong oversight of how the loans are used, whether in the form of an individual car czar or committee, will be part of the final package.

Party on, Detroit.

.....But as good as those moves are, they pale next to the problems of GM's weak car brands and gargantuan pension payments. In essence, Rick Wagoner is battling 30 years of management mistakes that have left him with immense burdens and very little room to maneuver. Chief executives from Frederic Donner to Roger Smith built up a bloated bureaucracy that cranked out boring, low-quality cars. Turf battles at headquarters sapped resources and diverted attention from a rising threat out of Asia and Europe. Those competitors drove away with the U.S. car market. Now they're aiming to do the same in sport-utility vehicles and trucks--the last bastion of U.S. dominance. GM's most profitable segment is also under attack by environmentalists and safety regulators, and more and more buyers are flocking to smaller crossover SUVs.

Even worse for GM was the buildup of lavish health and retirement benefits for workers that it agreed to in fatter days as a way to buy peace with the United Auto Workers. The company says the gap between its pension funding and future liabilities is now $19.3 billion. That means GM will have to pump as much as $4 billion into the fund over this year and next. Providing health care to former and current workers will drain an additional $5 billion per year. The pension costs alone will cut projected 2003 net income from $4.2 billion to $2.8 billion. Providing for retirees saddles each car rolling off a GM assembly line with a $1,350 penalty vs. a Japanese car built in a new, nonunion U.S. plant, says analyst Scott Hill of Sanford C. Bernstein & Co. That's a daunting handicap in an industry that struggles to make an average operating profit of $800 per vehicle.

....

Wagoner and his team have little choice but to wait out their biggest mess--those massive health and pension costs. Wagoner is brutally realistic: "We'd be accused of a pipe dream if we said in 10 years these issues will go away." GM pays its UAW workers only slightly more per hour than Toyota, Honda, and Nissan (NSANY ) pay their American factory workers. But the cost of pension and health-care benefits for current workers is huge--about $24 per hour at GM, vs. $12 at the foreign factories. Pension obligations swelled after the 1990 contract, when then-Chairman Robert Stempel practically guaranteed almost no layoffs. Underestimating the speed of its decline, GM agreed to pay workers for years after a furlough. As losses mounted, GM resorted to early-retirement offers--avoiding billions in unemployment benefits but adding thousands of retirees. Since GM was shrinking faster than Ford, its pension rolls grew more quickly, to 2.5 retirees per worker today, vs. Ford's 1-to-1 ratio. Last year, GM plowed almost $5 billion into the pension fund to shore it up as stock prices fell. But Carol Levenson, an analyst for bond research firm Gimme Credit, points out that GM had to take on $4.6 billion in debt to do it. Until the stock and bond markets spring back, it's three steps forward and two steps back.

the $15 billion is designed to ensure they stay alive until March when the issue will be readdressed with the input of a fresh Obama administration